Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5055639 | Economic Modelling | 2011 | 8 Pages |
We study the potential loss in social welfare and changes in incentives to invest in R&D that result when the market leading firm is deprived of its position. We show that under plausible assumptions like free entry or repeated market interactions there is a social value of market leadership and its mechanical removal by means of competition policy is likely to be harmful for society.
Research Highlights⺠We study incentives to invest in R&D in a market with and without leadership. ⺠The first model we use is Stackelberg quantity competition with endogenous entry. ⺠The second one is repeated price competition where leadership emerges endogenously. ⺠We show that in both cases there is social value of market leadership. ⺠In both setups the leader generates higher consumer surplus and social welfare.